Denmark: Activity falls back to contraction in Q1
May 17, 2021
Economic activity swung back to contraction in the first quarter of 2021, according to a preliminary release, with GDP falling 1.5% in seasonally-adjusted quarter-on-quarter terms (Q4 +0.7% s.a. qoq). Moreover, the economy underperformed in the quarter compared to the Euro area’s average (Q1: -0.6 s.a. qoq; Q4: -0.7% s.a. qoq).
The downturn was chiefly a result of tighter restrictions implemented to curb the spread of Covid-19. The measures mostly affected businesses that had to remain closed, such as those in the culture, retail and restaurant sectors. Meanwhile, total employment decreased 0.5% in Q1, likely weighing on household consumption.
However, industrial activity helped to cushion the overall fall in Q1, and the downturn was softer than the one in Q2 2020 due to restrictions being more targeted and not affecting the overall economy.
A more detailed release will be published on 31 May.
Reflecting on the economic outlook for the year, analysts at the EIU commented:
“The extent of new growth will remain limited until controls on household activity are meaningfully lifted around mid-2021. Alongside the expected removal of some economic restrictions in the spring of 2021, the revival of economic activity will continue, with base effects (owing to the substantial slowdown in the first half of 2020) flattering GDP growth on an annual basis. […] We expect GDP to expand by 3% in 2021, as consumer and business confidence recover domestically and international trade in both goods and services starts to revive.”
Author: Marta Casanovas , Junior Economist